Pensions to rise with inflation - but what about working people???

[doris9034]

BBC Website: "Liz Truss and Chancellor Jeremy Hunt jointly agreed to guarantee that the state pension rises with inflation next year - thereby maintaining the "triple lock" - ahead of PMQs this morning, Downing Street says.
In a huddle with reporters after PMQs, the prime minister's official spokesman said the decision reflected the "unique position" of pensioners who are "unable to increase their earnings through work"

But I - and millions of others - are also unable to "increase our earnings through work" because we are in the middle income bracket, our employers do not have the capacity to raise our earnings in line with inflation and we don't qualify for any state related benefits.

So, whilst I 100% don't begrudge the helping of pensioners (many of whom are probably among the better off anyway), I can't help but feeling a bit annoyed that it always seems to be the ordinary working person / family that never gets any respite from the ever increasing cost of living.

I'm in my early 30s and have always had an active interest in politics. 10 years ago I was in the minority in my social circles but now virtually every single person I know has become more invested and active in politics. It's even more noticeable in those younger than me and many I speak to genuinely feel like their futures have been stolen from them by the greed and selfishness of older generations

I hoped you stamped your foot and sthcweamed until you were sthwick with that last sentence.

The thing is, most people who don't do pensions or financial planning professionally are very easily conned. There are a few universal and permanent rules and guidelines.

1. The money you save into your pension from your first payday until you have your first baby is the most valuable, because it has more years to earn interest at compounded rates. One rule of thumb reckoned that if you contributed to your own pension saving fund 10% of income for the first ten years of your working liife, you would have done enough saving to make a very decent dent into providing for your future old age.
2. Don't keep it in cash in the early years... a good broadbased unit trust/mutual is more likely to match or beat inflation. Take fresh advice when you are 10 years from retirement age. The world will have changed a lot.
3. Read the newspaper. You can even trust the finance section of the Daily Fail -- just not the rest.
4. Do not ever believe the person who promises to make you rich. If they suggest they can enrich you more than a few % over base rate, they are fishing for gullible people to scam.
5. There is no such thing as a free lunch. Expect to pay for impartial advice and expertise if you want good results. The best people expect to be paid properly for the time and thought they put into considering your needs. If you are told the advice is free, then they are salespeople earning a commission.

I used to do this stuff for a living.

Judging by this thread, I'm not surprised that no government has planned for the changing demographic or even wants to discuss it.

You obviously had a well paid job if you were paying NI on a part time job as a teenager.

The point is there were things better then and things that are better now. You obviously were well paid as a teenager, as a teenage girl I was paid a pittance. Houses were cheaper but interest was higher. Childcare is expensive but we didn't get free hours when they were 3.

Pick and choose to make your argument doesn't lead to a balanced picture.

It’s too late now. The time to do it was 50 years ago. Just wait for us all to die and you’ll be grand.

And sooner than they think there will be another generation gunning for them.

And sooner than they think there will be another generation gunning for them

Yeah Gen Z will be after them soon. Even though my Gen Zedder loved her Gp’s, parents and Millennial brothers. Because this is how the world operates outside of MN.

But I’ll make sure she knows she’s gunning after the moaning jndividuals who think their grandparents’ stole what was ‘rightly’ theirs. Note use of ‘right’ and not ‘earnt’

@nootsy you have to be fair and not ascribe what's now common knowledge to previous generations. I first heard the word 'demographics' in 1984, from a pension fund actuary on Wall Street. And I probably heard it earlier than anyone in London.

I first heard it in the late 90’s.

Before the internet, even before the world wide web. The US military had a rudimentary version in 1983, but it was considered so important to security you couldn't write about it. Then it crept out into science in universities. My first email address was purely numeric.

You had to have been nursing in 1996 , which give you special classes to retire at 55. All changed with pension now.

I paid NI back in the early 80s when I was still at school ( 6th form) working as a weekend chambermaid ….. I paid 4 years NI before I was 20

@ancientgran I still don't get your point? I'm not picking & choosing anything. Things are much harder now with regards to mortgages, that doesn't mean it was a breeze in the past & childcare costs aren't really mitigated by "free hours", plenty of women still can't afford to work. I worked in retail & was f/t during holidays, the same job pays pretty much the same salary now, 20 years later, which is another issue.

I paid NI back in the early 80s when I was still at school ( 6th form) working as a weekend chambermaid ….. I paid 4 years NI before I was 20

Yeah I didn't earn loads.

@nootsy, I'm trying to find a post I wrote yesterday, about the danger of double digit interest rates, based on data from Hamptons and the BoE and reported in the Sunday Times' Home section last week that showed mortgages are more affordable now, since 2008, than in the period from January 74 to 2008. The percentage of income absorbed by a single person paying a 75% mortgage peaked in October 1989 -- when it soaked up 77% of average pay, but it averaged over 60% for most of a quarter-century.

This is why your parents, who survived those years and have now paid off the mortgages which look cheap and easily serviced to you now, roll their eyes occasionally. House price inflation galloped away after 2008 because of quantitative easing and ridiculously low interest rates. Too much money chasing too few houses has sent asset prices soaring.

And you can only be a decade or so younger than me, if you were a teen chambermaid in the early 80s.

Same, I paid NI for part time work in the 90s. I did 2 or 3 evenings work a week, and more in school holidays, but it didn't take much to exceed the threshold even then.

It's a bit of a bizarre claim that paying NI means someone was "well paid".

Here's the stats, with thanks to @Blossomtoes

Affordability over time
Mortgage repayments as a percentage of the average salary
Table with 4 columns and 6 rows. Currently displaying rows 1 to 6.
Year Percentage of salary spent on mortgage BoE base rate Equivalent base rate today
Jan-74 69% 12.75% 6.5%
Apr-80 66% 17.00% 6%
Oct-89 77% 14.88% 8%
2007 Q3 52% 5.50% 3.5%
2022 Q3 46% 2.25% 2.25%

Those statistics alone don't tell us much tbh.
What was the length of those mortgages, size of deposit needed, age at which mortgages were obtained? What percentage of the remaining income was disposable? And what kind of homes are those mortgages paying for?
It's impossible to compare really.

@Kabalagala The basic information: 25 year mortgages, with 25% deposits, being paid by single income households. No mention of property types or locations, so the figures are UK national average figures across the residential market. As I said, the raw data was from Hamptons, a national estate agent, and the Bank of England.

It is not impossible to compare, because the same sources are used from 1974 - 2022.

The answer is in the title of the chart: Affordability over Time

@nootsy
well of course the ‘70’s saw record wage growth as for the first time women had to be paid equal salaries.
Full time women’s earnings rose by 5% over 5 years in the 1970’s, the biggest ever increase in this ratio.

On 1998 the average percentage of monthly salary spent on a mortgage was 30% ? This has remained broadly unchanged over the last 20 years apart from around 2008. However, there is far less home ownership amongst younger generations so its getting more and more skewed. The mortgages are also longer now and require higher deposits in proportion to salary and ability to save (while paying private rent). My figures from the bank of England don't match the poster's above....

Its also worth noting that private renters pay a far higher proportion of their salary on accommodation than owner occupiers.

At one point 100% mortgages were the norm. Now it's very normal to have a 90% mortgage for 35 years.
Was the average house being purchased in 1974 the same size as in 2022?
How much impact did the mass sell off of discounted social housing in the 80s and 90s have?

That data alone it's not a particularly helpful comparison.

It is true NOW that private rent costs more than the equivalent mortgage, but it hasn't always so. Private BTL was unusual, but there were accidental LLs.

Anecdata, but mine so ....When I bought my first property, a one bed flat, in a less-than-desirable part of north London in 1987, my mortgage was for 95% of the price, interest only, over 25 years. Three years later I moved 200 miles and in with DP, and let my flat because no one offered to buy it. Negative equity. So I let it for the next eight years at below my mortgage payments, and paid the rest. Eventually interest rates came down, so I broke even, and then a friend rented it so I didn't bother selling until 2003 or 2004, when the London market was roaring away on steroids.

I don't think the discounted social housing sell off would alter those figures significantly except to make the figures look more affordable. And the size of the houses is irrelevant: most of the houses bough and sold then are still in existence. Houses have been built but the older ones still stand.

What has changed is that the UK's population has grown by some 10-12 million people, give or take a putative extra million who are believed to llive under the radar.